Super fund members will have a lot to celebrate as the decade ends, with 2019 returns well in double-digit territory.

Research house Chant West expects the median growth fund to produce an annual improvement of 14.5 per cent.

The result is a major turnaround from 2018 when funds finished only 0.8 per cent in positive territory after a big stock market slump hit in the second half of the year.

The balanced or growth fund has between 61 and 80 per cent of exposures in growth assets (such as stocks) and is where around 80 per cent of people have their super invested.

The performance has lengthened the long run of returns that have been way above what the creators of superannuation expected members to get.

That expectation was the consumer price index plus 3.5 per cent, which in the current low inflation environment would have meant returns of 5.5 per cent.

Mano Mohankumar, Chant West’s research manager, described the returns as “a very impressive result”.

“Fund members will have every reason to be delighted when they see their end-December balances. It’s against the expectations of many experts,” he said.

Consistent strong returns have pushed up the value of all fund types.

The main drivers of super’s performance were stock markets which performed remarkably well despite political ructions in the US, China and UK.

Over the calendar year Australian shares were up 26 per cent, international shares on a hedged basis [insured against currency moves] were up 24.5 per cent and it was 29 per cent for international shares.”

“Super funds typically have their international share exposures only 30 per cent hedged so they have benefited from that remarkable result for unhedged international shares,” Mr Mohankumar said.

Australian bonds were up 9 per cent and international bonds were also strong, he said.

The international share price performance was “remarkable” said Mano Mohankumar.

Super’s remarkable run is highlighted by the fact that over the 26 years since the introduction of voluntary superannuation, 14 years have seen double-digit returns, and only three years have seen negative returns.

The major negative was a massive 21.5 per cent fall following 2008’s the global financial crisis.

But members should not be seduced into thinking the good times will roll forever as recent performances “aren’t sustainable over the long term” according to Mr Mohankumar.

“With record low interest rates and low inflation, asset prices have risen to levels that are at or approaching full valuation. There’s ongoing concern about the slowing of global economic growth, and what central banks have left in their armouries to counter it,” Mr Mohankumar said.

However “whatever the outlook, Australians should take comfort that their superannuation is generally invested in well-diversified portfolios with investments spread across a wide range of asset sectors,” he added.

“The typical growth fund has more resilience built in than it did a decade ago, so it is better positioned to weather a period of investment market weakness if that eventuates.”

The strong performance of superannuation saw overall assets under management in the sector rise 7.1 per cent to $2.927 trillion in the year to September 30.

That is lower than the rise in the median growth fund for a number of reasons.

Returns from different fund options diverge.

The ageing of the workforce means that more people are retiring and drawing on their funds.

That has seen outflows from pooled super funds grow from $15 billion to around $22.5 billion between 2014 and 2019. Also funds in more conservative modes don’t perform as well as the media growth option. Many self-managed super funds, which have $746.2 billion under management, also underperform that median.

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